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Free to Forfeit: Delaware High Court Holds Employee Choice Is Proper Lens for Evaluating Forfeiture-for-Competition Provisions in Partnership Agreements
Categories: Non-Compete Agreements
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In a bombshell ruling last year that upended longstanding Delaware law, the Delaware Chancery Court ruled in Ainslie v. Cantor Fitzgerald, L.P., 2023 WL 106924 (Del. Ch. Jan. 4, 2023), that forfeiture-for-competition clauses, under which departing employees must forfeit certain long-term incentive compensation if they join a competitor, are akin to post-employment noncompetes and other restraints of trade.  As a result, the Chancery Court determined these forfeiture provisions should be analyzed under a reasonableness standard rather than the employee choice doctrine ...

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